Cutbacks Mount in Real Estate Industry

This Washington Post article (http://www.washingtonpost.com/wp-dyn/content/article/2007/08/26/AR2007082601083.html?hpid=sec-business) tells a story that will be spreading across the country as real estate sales slow and the further fall out from the sub-prime mortgage market meltdown continues. The overall ripple effect, I believe, will be a significant drain on the economy. I know for a fact that lay offs are occurring in this market too. Not surprisingly, some are warning of a possible recession. Here are some story highlights:

Washington's real estate industry, already pinched by a slowdown in residential construction, is bracing for further retrenchment after last week's meltdown in the mortgage market. In recent months, companies have begun cutting back in big ways and small. A Prince George's County builder laid off four workers and turned off the spigot for new projects. A four-person title company in Arlington is cutting its staff by one after watching business fall. A Fredericksburg drywaller let his 10 employees go and is struggling to keep the business afloat.

Individually the cuts are not large, but collectively they are beginning to add up across the region. Economists estimate that the real estate industry accounts for 12 to 15 percent of the jobs in the Washington area. The sector has played a large role in the region's economic growth over the past five years, and economists are watching recent events for signs of whether the slowdown will begin to drag down consumer spending and other parts of the local economy.

Economists at Lehman Brothers said in a report last week that a pullback in mortgage lending would prolong the U.S. housing recession and trigger job losses in the real estate, construction and mortgage industries. Home sales and construction starts will continue to decline through the middle of 2008, and national home prices will fall "modestly," said the authors of the report, Michelle Meyer and Ethan Harris. Their conclusion: "The housing recession looks far from over."

Obviously, this trend, if it continues, especially if foreclosures significantly increase, will put voters in a very foul mood come election time in November 2008. I hope the Democrats wake up and see the writing on the wall and take advantage of it to eviscerate the GOP in 2008. According to Chimperator Bush, the economy is doing fine.